Beneficiaries, Creditor Protection & Claims

Who gets the money and how: revocable and irrevocable designations, wills, trustees for minors, the family class that protects a policy from creditors, and the rules and deadlines for paying life and A&S claims.

Legal aspects of insurance and annuity contracts2 min read6 sections

Must-know for the exam

A designation of 'heirs' or 'estate' is a designation of the personal representative (s. 59(3)).
An irrevocable designation must be filed with the insurer; one made in a will is treated as revocable (s. 60).
A later designation overrides an earlier will; revoking the will revokes a designation in it (s. 61).
A predeceased beneficiary's share goes to surviving beneficiaries equally, then to the insured's estate (s. 63).
Money payable to a designated beneficiary is outside the estate and beyond the insured's creditors (s. 65(1)).
Naming a spouse, child, grandchild or parent protects the policy itself from seizure while the insured is alive (s. 65(2)).
In BC, money for a minor with no trustee goes to the Public Guardian and Trustee; an 18-year-old beneficiary can receive it (s. 88).
Death claims are paid within 30 days of sufficient proof; actions must start within 2 years of proof and 6 years of death (ss. 73, 76).
Common disaster: the beneficiary is treated as dying first unless the contract says otherwise (s. 83).
A&S: forms within 15 days of notice; loss-of-time benefits within 30 days of proof, then at least every 60 days; lump sums within 60 days.

On this page · 6 sections

Traps that cost marks

Assuming 'heirs' means the children by name.
Thinking a revocable beneficiary must agree to be removed.
Treating an irrevocable designation like a revocable one.
Thinking a will can create an irrevocable beneficiary.
Assuming the will always wins.
Thinking a designation survives the revocation of the will that made it.
Assuming an invalid will cancels every designation in it.
Paying a predeceased beneficiary's share to that beneficiary's estate or children.

Why it matters on the exam

Beneficiary questions are common across all four modules. Read carefully who owns the policy, whose life is insured, who is named and whether the designation is revocable.

Designations

Type	Can the owner change it alone?	Creditor protection
Revocable, family class	Yes	Policy and proceeds protected
Revocable, other person	Yes	Proceeds outside the estate only
Irrevocable	No, needs consent (age of majority) or court order	Policy beyond the owner's control and creditors
Estate / heirs	Yes	None: money falls into the estate

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Frequently asked questions

Can a policyholder change an irrevocable beneficiary?

Not without the beneficiary's consent while the beneficiary is living (Insurance Act (BC), RSBC 2012, c. 1, s. 60(1); same rule in the other common-law provinces).

Which beneficiaries protect a life policy from the insured's creditors?

A designation of a spouse, child, grandchild or parent of the life insured makes the insurance money and the insured's rights in the contract exempt from seizure (Insurance Act (BC), s. 65(2)).

Exam-style questions

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Ethics and Professional Practice · Component 1: legal aspects of contracts (60%)